As fresh charges are filed against Nissan’s former boss, a look at the murky facts around his arrest and detention

In October 2016, Carlos Ghosn rented out the Grand Trianon in Versailles for his lavish second wedding. Hired actors in towering wigs and 18th century costume mingled with the 120 guests.

Pictures of the event have flooded the internet since the highflying Ghosn was yanked down to earth with his arrest in Tokyo on November 19th. He has spent the nearly two months since living on prison food and sleeping in a pokey cell with a toilet in the corner. This week he fell ill after a court appearance where his gaunt appearance shocked some.

Ghosn’s spectacular fall has naturally proved irresistible to the media. For some, he is emblematic of an arrogant globetrotting elite, oblivious to the ghost of Marie Antoinette and her fate at the hands of the hoi polloi.

In Japan, where executive compensation tends to be more modest, magazines have recounted anonymously sourced stories of Ghosn’s extravagance: his demands for more money and perks; his opulent homes in Beirut, Rio de Janeiro, Paris and Amsterdam. After his arrest, a Japanese tabloid newspaper dubbed him kane no mouja, a “money grubber”.

Saving Nissan

This gleeful media thrashing is all the more shocking given Ghosn’s previous exalted status. Japan’s best-known foreign boss, the French-Lebanese-Brazilian was considered the saviour of Nissan, which came close to collapse 20 years ago.

Before his halo slipped, he came seventh in a Japanese poll on who should run the country. Even his detractors acknowledge that his influence on Nissan was profound, after Renault sent him to Tokyo in 1999 to make good on its $5 billion-bet on the ailing Japanese carmaker.

Ghosn went enthusiastically to work, slashing excess capacity, shuttering factories and eliminating 21,000 jobs. But it was the reforms beneath the “le cost-cutter” headlines that arguably proved more lasting, as he ruthlessly trimmed Nissan’s cluttered management, pruned its mess of cross-shareholdings and introduced promotion by merit, not seniority.

The result, said John Harris, Ghosn’s former speechwriter was that Nissan returned to the black within two years (after eight years in the red) – recording its highest profit ever. “This was true leadership.”

Ghosn’s reputation as a miracle-worker put him in demand. By the time Tokyo prosecutors met him last November at Haneda Airport, he was effectively running the world’s largest car alliance: Renault, Nissan Motor and Mitsubishi Motor (he added scandal-tainted Mitsubishi to the portfolio in 2016 when Nissan took a 34 per cent stake). As his fame grew, he began to demand more money, says Toshiaki Oguchi of Governance for Owners Japan, a lobby group.

He was not shy about asking: his strategy was to point to the far higher international compensation for foreign executives. “I think he was not happy with his pay and thought he was worth more,” says Oguchi.

Greed

Some commentators were quick to suggest that Japan Inc has taken revenge. Ghosn’s fall, said Jesper Koll, head of the Wisdom Tree asset management group, underscores a key principle of Japanese corporate governance – “greed and manipulation for personal gain will not be tolerated”.

Koll said Ghosn’s arrest coincided with a business-led reform drive that sought to stamp out the “excessive greed and plutocracy plaguing many western-style” businesses, “Japan prides herself on having a better system”.

Suspicions that Nissan wrapped itself in the Japanese flag and orchestrated Ghosn’s ousting – with help from the government – have been deepened by the circumstances of his arrest. Nissan managers worked with public prosecutors under a new plea bargaining system to put Ghosn behind bars.

The rare decision by Ghosn’s legal team to go public with their criticism of his lengthy detention has done little to dispel claims that he is the victim of a judicial lynching

An unidentified whistleblower appears to have been the source of claims that he was under-reporting his income and milking Nissan for his own gain. The reported amounts involve up to $80 million (€69.4 million) and could land the Brazilian-born executive in prison for up to 10 years.

Tensions between Nissan and Renault – two carmakers with a great deal of national prestige – simmered in the background. Renault had become, in the words of Glen S Fukushima, a former president of the American Chamber of Commerce in Japan, the tail that wagged the dog.

The French company had acquired a 43 per cent share of Nissan following its bailout. Nissan’s share in Renault is a mere 15 per cent, yet Nissan poured more than $3 billion in pretax profits into Renault’s coffers in 2017. The raw facts of this arrangement, coupled with Ghosn’s imperious lifestyle, helped alienate his once loyal Japanese supporters.

The rare decision by Ghosn’s legal team to go public with their criticism of his lengthy detention has done little to dispel claims that he is the victim of a judicial lynching. Lead defence attorney Motonari Otsuru said prosecutors had overreached by arresting Ghosn and that their claims of criminality could be disproved.

Nissan executives appear to have signed off on some of Ghosn’s alleged wrongdoing, such as an arrangement in which he temporarily transferred currency losses to Nissan during the 2008-09 global financial crash.

In his 10-minute court address this week, he admitted paying $14.7 million to a Saudi Arabian businessman, but said it was to help Nissan’s struggling business there and not (as prosecutors claim) for personal profit.

Powerful prosecutors

None of this sets Ghosn free. “The prosecutors indeed seem to have overplayed their hand – I think that is obvious given the way things have played out so far,” says Colin PA Jones, a law professor and lead author of The Japanese Legal System. “But it doesn’t mean they are going to lose either. Prosecutors win all sorts of bad cases in Japan.”

Prosecutors presented a fresh charge on Friday, accusing him of an aggravated breach of trust, relating to the transfer of the currency losses. He has already been indicted on a separate charge of under-reporting his pay over five years.

Otsuru warned this week that Ghosn could spend months in detention until he gets his day in court. If precedent is any judge, he has little chance of proving his innocence.

Japan’s criminal justice system has been called “hostage-based” because it depends heavily on extracting admissions of guilt during lengthy detention periods. Suspects have limited access to lawyers during questioning, which has been known to go for months.

The conviction rate for indicted suspects is 99.8 per cent – nearly 90 per cent of defendants plead guilty. The entire judicial process depends on confessions. The career of prosecutors – elite bureaucrats from Japan’s best universities – rises or falls on their success at securing them.

The business fallout will linger long after Ghosn’s fate has been sealed

Ghosn’s case stands out, say experts, only because of his fame. “The majority of suspects here who dispute the allegations are detained in police station cells, and are thereby under the control of investigators 24/7,” says Silvia Croydon, author of The Politics of Police Detention in Japan.

Most criminal suspects, thus detained, continue to be held there for the entire duration of their pre-indictment detention. “It is regrettable that the nature of Ghosn’s high-profile arrest obscures the reality of most other criminal suspects in Japan.”

Of course, Ghosn has not signed a confession. But given the stakes put down by prosecutors so far, Croydon says it would be a major loss of face to either not take him to trial, or get a conviction.

“You can expect they will be placing a very high priority on doing what they can to make sure these things don’t happen.” One aspect of the case being closely watched is the new plea-bargaining system, introduced last June – presumably the details of the whistleblower’s allegations will be revealed in court.

The business fallout will linger long after Ghosn’s fate has been sealed. At the very least, says Mr Oguchi, Nissan has questions to answer about corporate governance. Its checks and balances clearly failed to keep its boss in line. As for the Renault-Nissan-Mitsubishi alliance, it “is tarnished for good,” concluded The Economist recently.

Last month Nissan declined Renault’s demand for a special shareholder meeting to discuss Nissan’s “indictment, governance and Renault’s appointees on Nissan’s board,” according to Reuters. All sides seem set to come out of this bitter dispute diminished.

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